Actuarial reduction in reverse?

[Middlechild3]

I have been given figures for a pension actuarially reduced if I claim it at 60 this year. I have the factor they used. The normal end age is 67. I want to work out how much more the amount would be if I defer it 1/2/3/4/5/6/7 years to inform when I decide when to take it. Is there a simple formula to work this out or is it more complicated? I'm going a bit number blind.

It's complicated as it would depend on the mortality tables.

Most schemes I have come across do not give an uplift for deferring retirement.

That's different to what I'm asking thanks

Do you want to know how much you would get it you take it at 61/2/3/4/5/6? But not to defer past 67. Yes?

And to ask the obvious question, is there a reason you can’t ask them to give you the figures?

A simple linear scale might get you close enough if you know the amount at 60 and at 67, but it depends on how accurate you need to be.

So you are not actually going to defer but considering retiring not quite as early? The average reduction is about 4/5% per year so you can get some idea.

There’s a table for actuarial reductions in the Local Government Pension Scheme on this page - https://www.lgpsmember.org/your-pension/planning/taking-your-pension/

If you’re not in the LGPS, you would be best off asking your pension provider if they have an equivalent table.

All schemes are different, you need to ask your pension provider.
If precision doesn't matter though and you are just after a rough guess, I would simply divide the reduction by 7 and assume 1/7 per year. It's unlikely to be wildly different.

OP, the answer to your question depends on how your scheme expresses its early retirement factors. Some schemes will for example communicate a 5% reduction for each year by which a pension is taken early (and a pro-rata amount for each month). Other schemes will say for example that if you retire exactly 7 years early you will receive 65% of your total pension (same thing, just expressed differently- and the member may be told their factor is .65).

Ive only encountered schemes which apply the same amount of reduction for each year which makes extrapolating the result in eg a year’s time fairly easy. BUT I can imagine there may be schemes out there whose rules specify factors for use in different circumstances and so it would be worth checking in with your scheme administrator on this point. Please remember however that scheme trustees will review their actuarial factors and change them from time to time. I’ve seen quite significant adjustments made, and I would expect a review (even if there is no resulting amendment) during a 7 year period. Any change could be favourable to you or not.

Agree with the previous two posters.

You may also have some parts of your pension that are payable unreduced from an earlier age than 67.

Your scheme administrator may also have some online tools available to give you these estimations.

All schemes are different so no one on here will be able to tell you. Also, late retirement increases are not the opposite of early retirement reductions so you can't assume that if the reduction is X% on retirement 2 years early you'd get an X% uplift if you retired 2 years late. You'll need to contact your pension scheme administrators and ask. But note that if you're not retiring imminently the factors could change between now and when you actually retire.